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Irish Economy: Economists at the Economic and Social Research Institute (ESRI) say in a paper published today that Budget 2015 will have its greatest impact – a reduction of 1% in net household income – on the 10% of households with lowest incomes. Smaller losses will be experienced by most middle income households, with small percentage gains for higher income households. The greatest gain will be close to half of one percentage for the top 10% of households.

The paper 'Distributional Impact of Tax, Welfare and Public Service Pay Policies,' [pdf] by Claire Keane, Tim Callan, and others focuses on the impacts of changes in tax, welfare and public sector pay on households’ incomes, net of taxes and the revised water charges. Policy impacts are measured against a “distributionally neutral” benchmark, which indexes welfare and tax parameters in line with expected wage growth of 1.4% in 2015.

On the combined budgetary effects of the period 2008-2015, the paper finds that the combined impact of budgetary policy changes since October 2008 show that the percentage losses were greatest for those with the highest and lowest incomes; there were smaller losses for those at middle income levels.

Households with the highest incomes (the top 10%) saw losses of about 15½%, mainly from tax increases and reductions in public service pay.

At the other end of the income scale (households with incomes in the lowest 10%), budget-related losses were somewhat higher than average, at close to 13%. Households with incomes in the middle of the distribution had lower, though still substantial losses from budgetary action (between 10 and 11%).

Analysis at family unit level reveals that the greatest proportionate losses imposed by Budgets 2009 to 2015 were for single unemployed people, while the lowest losses were for pensioners. This reflects the substantial cuts in welfare payment rates for the young unemployed in particular, and the fact that pension payment rates, unlike working age payment rates, were not reduced.

Speaking about the findings, Dr. Tim Callan, said "“Families at all income levels and of all types have seen income losses due to budgets over the last 7 years. Single unemployed people without children have been the hardest hit, while retired singles and retired couples have been the least affected”.